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Reading the commercial real estate signs

2010 is already proving to be better. That's what Lexington's commercial real estate agents say they have seen so far this year, and what they hope to see continue, to help erase memories of a slow 2009.

"There seems to be a lot more interest and a lot more people moving around," said Al Isaac, president of NAI Isaac, a commercial real estate service. "I don't think it's going to be back to the pace of 2007, but I do think there will be a lot more activity."

NAI Isaac last week released its year-end report on commercial property, which stated that 13.76 percent of office space downtown was available. That's up from 11.59 percent at the end of 2008.

Some of that increase came because of space becoming available in the Chase tower after the bank's 2007 announcement that it would close its regional loan center in Lexington and eliminate 430 jobs.

"There are a lot of holes and availability in downtown," said Bob Cole, president of the commercial real estate company Coleman Group, adding he doubts there will be much absorption quickly.

"I tell people I think we've got a three- to five-year inventory of space downtown," he said. "The downtown market right now is about as soft as it's ever been, or at least in the 20 years I've been in Lexington."

Isaac said the proliferation of space offers agents an opportunity "to expand someone or bring someone new into town when there really wouldn't be any options for them to look at downtown," Isaac said.

The same holds true for a large opening at some of Lexmark International's property in its suburban headquarters at New Circle Road and Newtown Pike.

Tim Haymaker's Haymaker Bean Commercial Real Estate is marketing 135,000 square feet of space in a Lexmark building across from the printer maker's main offices.

Haymaker, whose firm is partnering with the Chicago office of the multinational firm CB Richard Ellis, said the companies are just getting under way with the marketing.

He said they have filled out a survey, though, in response to a request by area economic development officials on behalf of an unidentified company that is seeking a location for a data center.

Suburban office space shaped up better than downtown space, according to the NAI Isaac study. The suburban office vacancy rate was 12.61 percent, down from 13.15 percent at the end of 2008.

Isaac said he expects that rate to continue to fall because there has been very little construction of additional suburban office space.

Cole called that portion of the market "pretty healthy," saying "a lot of people are touring spaces looking to expand and in some instances relocate businesses."

He said he has signed about 37,000 square feet of suburban office space so far this year, well ahead of what was practically nothing at the same time in 2009.

Haymaker urged caution, though.

"While these numbers look good and they're accurate, you have a lot of folks who are occupying space who aren't paying or are paying reduced rents," he said. "So you have stress in the financial markets because the income stream for the landlords is being reduced. ...

"There really is a lot of activity, but you always have to look beyond what the activity is doing."

He said that in his spaces, "even my good tenants, whose leases aren't even due, are coming in and trying to negotiate lower rates."

Haymaker also said he's concerned about the number of specialty buildings like banks and automotive dealerships that are now empty, saying they will be difficult to fill except with similar businesses.

But amid the continued struggle, sometimes deals just fall into a person's lap.

As a result of some consolidation, restaurant operator Thomas & King had the fourth floor of its downtown building come open.

The company's advertising agency, Cornett Integrated Marketing Solutions, knew about the opening and decided to relocate, saving Thomas & King the work of placing the space on the market.

Said Thomas & King CEO Mike Scanlon, "I'm the happiest boy in the world."